"The pressures that we’re seeing accelerate the need to simplify what we’ve got," the WPP chief executive said after the company missed revenue targets at its half-year results on August 23 and the share price slumped by 11% in its biggest one-day fall since 1998.

As the world’s biggest ad group, WPP owns more than 160 companies. According to Brian Wieser, an analyst at Pivotal Research Group, "internal M&A" would be a logical way to simplify the group.

Several observers have said WPP could consider merging two or more of its four legacy creative agencies, Ogilvy, J Walter Thompson, Grey, and Y&R, each of which has its own P&L, or reducing the agencies that WPP operates outside its top 12 countries globally.

However, a source close to WPP rejected the idea of merging creative agencies as it would destroy shareholder value and pointed out the group already has a simplified structure with WPP managers in more than 50 countries.

Sorrell, who has headed WPP since 1986, has blamed cuts by CPG companies for the group’s 1.7% slump in net sales in the second quarter. He told investors his strategy of horizontality – getting agencies to "work seamlessly together" to help clients – was now a "critical priority" as CPGs have made clear they want to use fewer agencies.

"Moving the company figuratively from a vertical to a horizontal structure is the thing we have to totally focus on," he said, stressing the importance of acting like "one company," rather than a collection of agencies.

"I don’t think you can go in and declare one company overnight. That’s a mistake," Sorrell said. "To make an omelette, you have to break eggs and I think you risk breaking too many."

Earlier this year, WPP said it would merge Maxus and MEC to form a new agency, Wavemaker, and it moved Possible and Salmon into Wunderman. The group has also promised to save £150 million, or about $198 million, by merging IT and finance functions across the group’s agencies over three years. Scott Spirit, WPP’s chief digital officer, is said to be advising Sorrell.

Privately, some WPP insiders have expressed frustration that Sorrell has not carried out a group-wide restructuring or been more radical.

At the start of September, WPP’s top leaders met in Silicon Valley to discuss strategy. Speaking ahead of the meeting, one long-serving leader within WPP said, "Martin is more worried than he has been for a long time."

Investors were spooked in August when WPP cut its annual growth forecast to "between zero and 1%," even though Interpublic Group and Dentsu had already warned of cuts by CPGs.

Paul Richards, an analyst at Numis Securities, said, "The genie is out of the bottle on structural pressures – with Google, Facebook, and Amazon [bypassing agencies] and the rise of the management consultants. It is making people nervous about the agency sector."

Richards added WPP "has had a lot of success with horizontality," but noted it is also a "complicated" business that is "like a city" with 200,000 staff and many different divisions.

WPP has faced repeated questions in recent years about succession planning for Sorrell, who is 72, but analysts expect him to retain investors’ confidence. Wieser said, "So long as all agency holding companies are facing the same headwinds, no investor will assign WPP’s problems to current management."

WPP’s stock market value has dropped by about 25% to £18 billion, or nearly $24 billion, in six months. Sorrell told Campaign in June that speculation that he might be interested in a merger or tie-up with Accenture was "rubbish." One ally said, "He doesn’t need to sell it. What he does care about is creating a legacy for WPP and restructuring it to recognize the new dynamics in the industry."

Procter & Gamble and Unilever: the giants calling the shots

The world’s two biggest advertisers, Procter & Gamble and Unilever, have both spent 2017 looking at ways to trim their spend.

This has come as a blow to many of the big ad groups, particularly WPP, which counts P&G and Unilever as its second- and third-biggest clients after Ford. P&G cut its annual adspend to $7.12 billion (£5.5bn) – its lowest level since 2006 – the company said in August.

This reduction was driven by P&G slashing its digital adspend by $140 million between April and June 2017 because of concerns over online brand safety and ad fraud.

In August, P&G declared some of its digital adspend had been "ineffective" as second-quarter sales held steady despite the company making marketing budget cuts. The longer term paints a tougher picture: P&G’s annual net sales were flat in the 12 months to June 2017 and have fallen 12% to $65.1 billion since 2013.

Unilever, meanwhile, is cutting half of the 3,000 agencies it uses globally and has pledged to make 30% fewer ads. While these cuts are intended to save €1 billion (£923 million/$1.2 billion) by 2019, CMO Keith Weed has insisted that the company does not plan to decrease its media spend this year. Weed’s vision is to show fewer ads for a longer time.

In July, Unilever reported it had reduced its agency fees by 17% in the first half of the year, while the average cost of a film was down 14% and it had saved €300 million, or $359 million. The company’s marketing spend had risen steadily from about €5 billion ($6 billion) a year in 2008, apart from a small drop last year, to €7.73 billion, or about $9.3 billion, last year.